Safiya Malik

The Calcutta High Court Single Bench of Justice Sabyasachi Bhattacharyya, has adjudicated the transfer of a disputed property invalid, citing statutory prohibitions under corporate liquidation laws. The court held that any disposition of the property after the commencement of winding-up proceedings was void ab initio under the Companies Act, 1956, and rejected the applicants' claims.

The matter pertains to an application seeking the disclaimer of a property, specifically a flat and an adjoining open terrace, purchased by the applicants via a registered sale deed executed on September 30, 2021. The applicants contended that they lawfully acquired the property from their vendor, who had previously purchased it from the original owner before the winding-up process began. They argued that their vendor's purchase was legitimate and that their own transaction should stand protected.

According to the applicants, their vendor had lawfully purchased the property from Rajat Merchandise Private Limited, where Shree Rajat Enterprises was the developer. They further stated that the original transfer had been affected through a registered sale deed, conferring valid title upon their vendor. The applicants claimed that at the time of purchase, there were no legal encumbrances affecting the title, and thus, they acquired a legitimate interest in the property.

Opposing the application, the Official Liquidator (O/L) and the petitioning creditor contended that the company-in-liquidation had acquired indefeasible rights over the property before the purported transfer. They argued that the sale in favor of the applicants' vendor had occurred during the prohibited period prescribed under Section 531(1) of the Companies Act, 1956, making it invalid. Moreover, they pointed out that the company had previously undertaken before the court that it would not alienate its assets, rendering subsequent transactions unlawful.

The respondents further submitted that the winding-up petition was filed on June 28, 2013, meaning that any transaction affecting company property after this date required prior court sanction. They cited Sections 536(2) and 537(1)(b) of the Companies Act, 1956, stating that "any disposition of the property of a company made after the commencement of the winding-up shall, unless the court otherwise orders, be void.” They also referred to an order dated August 1, 2014, in which the company-in-liquidation had given an undertaking that it would not alienate its assets, an assurance that was subsequently violated by the impugned transactions.

The court examined the relevant provisions of the Companies Act, 1956, with particular reference to Sections 536(2) and 537(1)(b). It stated that "the nomination in favor of the applicants' vendor and the transfer in her favor was automatically rendered void by operation of law.” The court found that the transaction in favor of the applicants’ vendor was executed after the initiation of winding-up proceedings and fell within the statutory prohibitions.

The applicants had argued that the court’s previous order declaring their vendor’s purchase void was erroneous and should be corrected under the doctrine of Actus Curiae Neminem Gravabit. The court rejected this argument, stating that "there was no fraud practiced upon the court and all material facts were disclosed at the relevant juncture.”

The court also found that the applicants could not be considered bona fide purchasers for value without notice. It stated that "deliberate inaction on the part of the applicants speaks volumes about their intent to bypass the interests of the company-in-liquidation.” The judgment recorded that a diligent purchaser would have conducted due inquiries into the history of the property and uncovered the company-in-liquidation’s interest in it. It further cited Suraj Lamp & Industries Private Limited (2) v. State of Haryana and Sanjay Sharma v. Kotak Mahindra Bank Limited, reinforcing that "no title can be transferred without a registered conveyance deed executed in compliance with statutory requirements.”

The court also observed that under Section 3 of the Transfer of Property Act, 1882, "a person is said to have notice of a fact not only when he actually knows that fact but also when, but for willful abstention from an inquiry or search which he ought to have made, or gross negligence, he would have known it.” The judgment noted that the applicants had obtained their vendor’s sale deed, which disclosed the property's prior history, and thus could not claim ignorance of the ongoing legal proceedings concerning it.

The court categorically dismissed the application, holding that the applicants had no valid title to the property. It stated: "Accordingly, the application fails. Hence, C.A. No.27 of 2024 is dismissed on contest without, however, any order as to costs.”

Case Title: Laxmi Narayan Udyog Limited and Vijay Kumar & Another vs. The Official Liquidator
Case Number: C.A. No.27 of 2024 in C.P. No.452 of 2013
Bench: Justice Sabyasachi Bhattacharyya

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